What is Cryptocurrency?
What is cryptocurrency or crypto meaning? A cryptocurrency (or “crypto”) or crypto currency is a form of payment that can circulate without the need for a central monetary authority such as a government or bank. Instead, cryptocurrencies are created using cryptographic techniques that enable people to buy, sell or trade them securely.
Cryptocurrencies can be exchanged for goods and services, though they often are used as investment vehicles. Cryptocurrency is also a key part of the operation of some decentralized financial networks, where digital tokens are an important tool for carrying out transactions.
The most popular cryptocurrency, Bitcoin, has had a historically volatile price. In 2021, it hit an all-time high above $65,000 before falling back.
How does cryptocurrency work?
Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders.
Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate coins. Users can also buy the currencies from brokers, then store and spend them using cryptographic wallets.
If you own cryptocurrency, you don’t own anything tangible. What you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party.
Although Bitcoin has been around since 2009, cryptocurrencies and applications of blockchain technology are still emerging in financial terms, and more uses are expected in the future. Transactions including bonds, stocks, and other financial assets could eventually be traded using the technology.
Types Of Cryptocurrency?Types Of Crypto Tokens
crypto currency list
- Ethereum (ETH)
- Litecoin (LTC)
- Cardano (ADA)
- Polkadot (DOT)
- Bitcoin Cash (BCH)
- Stellar (XLM)
- Dogecoin (DOGE)
- Binance Coin (BNB)
- Tether (USDT)
- Monero (XMR)
- Honorable Mentions
Why Are Cryptocurrencies Important?
As decentralized platforms, blockchain-based cryptocurrencies allow individuals to engage in peer-to-peer financial transactions or enter into contracts. In either case, there is no need for some trusted third-party intermediary such as a bank, monetary authority, court, or judge. This has the potential to disrupt the existing financial order and democratize finance. The size of the cryptocurrency space has grown exponentially in the past decade, with new innovations and a collective market capitalization of more than $2.5 trillion.
Best Cryptocurrency to invest in 2022?
- Not all cryptocurrencies are the same and when it comes to choosing one for your investment, one size does not fit all.
- Doing your own research (DYOR) is imperative when looking to engage in the crypto market.
- Here’s what to look out for and what makes the popular cryptocurrencies on the market crowd favorites.
Investors looking to enter the cryptoverse have a number of questions to address — whether to buy a lot of one currency, divide their money between two different cryptocurrencies, or participate in the movement of multiple currencies.
There is no one size fits all formula and deciding which cryptocurrencies to invest in varies depending on the risk appetite of one person versus another.
Specific cryptocurrencies are more suited to specific needs, such as for investors, application developers, day traders, and so on. Having a deeper understanding of currencies, would give you a better chance of making an informed decision.
Do your own research (DYOR) — Here’s what
to look for:
Blockchain generation – Cryptocurrencies can be categorised into coins or tokens, and newer generations unlock more possibilities by the underlying blockchain.
Supply conditions – Supply being limited or unlimited can shape basic aspects of how a currency is used, and the impact it has on the wider economy.
Value and divisibility – Transaction pricing benefits from the flexibility of a hundred rupee currency that can be divided into 100 notes of one rupee each, and further subdivided into a hundred coins of one paisa each. Similarly, a cryptocurrency whole that can be divided into a million/billion sub-units, allows for flexibility in transactions.
Transaction costs – There is always a cost to handling a transaction, the only question is whether that means losing 4% or just 0.00025% in the process.
Transaction speed – This would be analogous to waiting in a check-out queue, you’d prefer the cashier confirming your purchase or sale as soon as possible.
Perceived transaction privacy – Within the crypto community, currencies can be perceived to allow for differing levels of privacy, even if law enforcement authorities have their methods to trace almost every transaction.
Notably, intangible and external factors do influence how a currency performs in the long run, and how it performs compared to other currencies. Many of the factors noted above can also have an impact on the currency we use daily.
Popular cryptocurrencies and what makes them attractive investments
Bitcoin – Continues to dominate and gain ground against other cryptocurrencies, being the oldest that has survived since a decade. It has pretty much fallen into the slot of an asset you buy for the long term.
Ethereum – Introduced innovations to the blockchain, and became a platform for other applications; it is the silver to Bitcoin’s gold. Ether is what you need to take part in high-value trades including non-fungible tokens (NFT).
Cardano – Claims to be more friendly to the environment, than other currencies. Like company dividends on stock, it is able to justify stronger prices over time, as it has gathered real-world uses, from farm supply chains to fighting retail plagiarism.
Tether – Uniquely in the crypto world, a significant rise or fall in this currency’s value would be seen as a failure. That is because it is a ‘stablecoin’ which is used to buy and sell other cryptocurrencies.
Solana – Is positioned in the sunrise sector of decentralized finance (DeFi) solutions, with 368 dApps built on top of it. It plays nice with other networks as well, and is attractive to developers, with users of those applications likely to need Solana tokens.
Polkadot – Applies a lot of the lessons that cryptocurrencies learnt over a decade, with advantages that could help it dominate the landscape. It plays well with others, costs less to transact and at a faster speed; which is quite the dream of the developing crypto finance sector.
Dogecoin – Created as a meme/joke, even the co-founder is stunned by this coin. Its value rose sharply with celebrity encouragement, but experts say its nature ensures that it may not rise so high again in the future.
Monero XMR – Turned out to become a number of things that society imagined Bitcoin to be. It is most comfortable in the darkness, can be relatively untraceable, holds value, and it can confidentially be created on home computers.
Why Is Bitcoin Still the Most Important Cryptocurrency?
Despite thousands of competitors that have sprung up, Bitcoin—the original cryptocurrency—remains the dominant player in terms of usage and economic value. Each coin (BTC) was worth roughly $47,000 as of December 2021, with a market capitalization of more than $886 billion.